Rethinking Assumptions

With $72 billion in revenue and 154 billion pieces of mail moved in a year, the U.S. Postal Service deals in the billions. That’s why you sometimes hear people joke that “a few million here and a few million there and pretty soon you are talking about real money” with the USPS.

But even for the Postal Service, unfunded liabilities — or future payment obligations for health and pension benefits — totaling about $73 billion is big money that has a huge impact on its long-term health. Hence, postal reform legislation over the years has included provisions that address the Postal Service’s health and retiree liabilities.

How those liabilities are measured has been the source of much debate in the postal community because of the assumptions used — such as interest rates and demographic inputs — to calculate the future costs. Our recent audit report looked at the impact of changes in assumptions on Postal Service retirement liabilities and found that by using Postal Service-specific demographic and economic assumptions, the overall liabilities decreased by $10.2 billion.

First though, let’s review what makes up the USPS’ long-term liabilities. The Postal Service provides pension and health insurance benefits to its retirees through the Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) pension programs. It also provides health benefits for retirees through the Postal Service Retiree Health Benefits Fund. The assets in these retirement liability accounts at the end of fiscal year 2016 totaled about $338.4 billion, while the liabilities as calculated by the Office of Personnel Management (OPM) were $411.8 billion. This means the liabilities are funded at 82 percent.

OPM calculates the Postal Service’s share of the retiree pension and health benefits liabilities using demographic and economic assumptions from the federal employee workforce. Our report, however, noted that those assumptions are materially different from those of the Postal Service workforce.

For example, federal employees can receive pay increases based on merit and promotions throughout their careers, whereas bargaining employees of the Postal Service reach the top of their pay scale in 12 or 13 years. Using demographic and economic assumptions of the federal workforce has burdened USPS with higher liabilities than if assumptions of Postal Service employees were used.

By lowering the liability estimates, the Postal Service reduces the amount it needs to pay annually to fully fund the retirement accounts. That difference could be used to reduce the Postal Service’s debt to the U.S. Department of the Treasury; more aggressively fund investments in USPS infrastructure; or reduce, slow, or delay future postage rate increases.

Comments (8)

Barbara Baruch

One side of the mailbox panel was left unlocked today in my apartment building, I tried to call the Linden Hill P.O. (my post office0 at 4:20 PM) to report it and no one picked up the phone. This is not a good practice and leaves the shareholders in my building open to mail theft.

May 19, 2017

B R

I think USPS should only deliver mail M-F and do away with Saturday service. Hire a better PR firm to explain how expensive and wasteful it is to operate on Saturdays...Also, USPS needs to devise a better system for reporting failures of local post offices rather than relying on them to self-investigate. My local post office keeps delivering other people's mail to me and the manager keeps telling me it won't happen again. It just happened again...waste of time and should be kind of a big deal delivering other people's mortgage statements, bank statements, or W-2s to the wrong address. USPS should work on building it's customer base through trust and not by offering the lowest rate to deliver junk mail. Our mailman retired in 2012 and that's when we noticed our local post office's slow descent into chaos where the only people left seem to hate their lives and especially their jobs. The lack of serious investigations into the declining accuracy is hurting USPS more than the retirement pension liabilities --- when you lose public trust you lose public support.

May 19, 2017

Joseph Marrone

We just purchased a condo in Ridge NY 11961 on March 30 2017 and we were concerned why we were not getting mail as I have family in the community that has been checking my mail box.
We finally called the local post office and found out that the delivery person decide not to deliver mail for some time to that address as they assumed no one was living there, even thought it was vacant for some time but had a register owner. I did not know that they could make decide to not to deliver mail at their whim.
First they told us we had to come down and fill out a form to start getting mail, why since the stopped it illegally as far as I am concerned. We told them we are in Florida and would not be moving in until July and wanted the mail to start being delivered, which they gave us a hard time telling us they could not do this and said to put a hold mail for us. But we and were expecting mail we needed and my family was going to pick up, so after further discussion with them they decided to start delivering the mail.
I really thought it was a federal law that mail has to be delivered?

May 18, 2017

Brent Strother

I have been to the post office in my neighborhood 2 days in a row at different times and each time it was closed. Yesterday I went to the post office and it said it was closed and to come back later. I went back and took care of what I need to do. Today I went to the post office at 12 noon and a sign was in the window saying come back at 2. It's always a issue at this post office and that is my only complaint. The service is good when they are open, the problem is multiple times I've gone in the past few months and it was closed. Location is Einstein Loop in Coop City in the Bronx. 10475

May 17, 2017

OIG Moderator

Hi Brent, and thank you for reaching out to the OIG. The best way to deal with this situation is to file a report with the OIG Hotline. That way we can investigate this issue further. To file a report please click the red button at the top of this page which reads: "Report Fraud, Waste, and Abuse." Thanks.

May 18, 2017

dawn bonelli

Reported mail missing over a year ago and happening again.

May 17, 2017

Blog Moderator

Thank you for your comment. The OIG is an independent agency of the Postal Service and day-to-day mail delivery issues are outside of our jurisdiction. If you have not already done so, please try contacting your local Post Office. If you have already done that, try contacting USPS Customer Service, (1 (800) 275-8777).

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